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Re: None

Wednesday, 02/05/2014 11:44:58 PM

Wednesday, February 05, 2014 11:44:58 PM

Post# of 345746
There are many positive signals that can be seen from the Preferred Stock terms revealed today. One of the key signals evident here is the vote of confidence from the institutional investor(s) who buy these Preferred Shares that the Company will be closing a large BP licensing deal with upfront cash in the near term.

Unlike the interest payable on a promissory note (which must be paid whether or not the company has surplus or profits), under Delaware law (and the law of most states) dividends can only be declared/paid out of surplus or net profits. See the explanation of this at bottom of pg. S-8. You can’t borrow money or sell stock to raise the funds to pay dividends. So the investors know they can’t receive their 10.5% return unless the Company does a Cotara deal or license deal with upfront cash that generates the surplus out of which dividends can be declared.

The institutional investor(s) who take down these Preferred shares have already been identified. You don’t put down $60 million on a hope and a wish that the Company will be able to pay the 10.5%. To the contrary, the smart money that buys these shares already knows the Company has multiple options for selling/licensing its technology to generate a surplus from which it can declare the dividends.

Now that the ATM is history and the Company has (or will have in a few weeks) $60 million in the bank to pay for the Phase III trial, at least two good things will follow: (1) Phase III enrollment will take off like a hockey stick and (2) the Company will have the financial muscle and confidence to negotiate better terms for the Bavi and Cotara licensing deals that are pending.

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